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Old 02-18-2012, 07:56 AM   #21
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In this case, it is. I predict you will get screwed if you do any of these harebrained things.
and we are collectively a bit biased since most of us are disciples of low-cost index mutual funds and they have served us well over the years.

I imagine that there may be some investment managers out there who consistently beat the indices and charge a reasonable fee, the problem is finding them and separating the wheat from the chaff. A lot of chaff out there.
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Old 02-18-2012, 08:50 AM   #22
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...but over long term that cost would be mitigated by the supposed advantage of the active management.
You might find yourself with excellent management and get stellar market beating performance for you 1.25%. But more than likely you'll be average or below average.

So I would not give up 1.25% right out of the gate, there are several VG tax managed funds that might suit you, but the regular stock index funds work pretty well in a taxable account
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Old 02-18-2012, 09:08 AM   #23
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To avoid or control taxes you might consider tax-exempt binds and low (or non) dividend paying high capital appreciation equities like Berkshire Hathaway
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Old 02-18-2012, 09:13 AM   #24
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To avoid or control taxes you might consider tax-exempt binds and low (or non) dividend paying high capital appreciation equities like Berkshire Hathaway
Is my tax rate high enough for that to be recommended?
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Old 02-18-2012, 09:15 AM   #25
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If you're OK with 4-5% return, I'd invest the money in some tax free bond funds to save on paying taxes on income in the future. I currently hold some T. Rowe Price tax free funds that have done me well. As for paying taxes on what you are planning to sell, you may want to consider doing this in the near future due to the very good prospect of the capital gains tax going from 15% to at least 20% in the next 2 years.
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Old 02-18-2012, 09:17 AM   #26
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Is my tax rate high enough for that to be recommended?
28% is pretty stiff and might well become even stiffer. You might want to take some of your bitter tax medicine now while LT cap gains rates are still 'reasonable'.
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Old 02-18-2012, 12:15 PM   #27
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I am really just reading about this stuff-- I think I should at least know what is out there! Had to google "equity indexed annuities"...seems like the devil is in the details on those. Less risk but smaller returns with high cost, and a long commitment that is expensive to break out of-- if only life were predictable!
Everything you ever wanted to know about equity indexed annuities (but were afraid to ask):

Life, Investments & Everything: Rolling Your Own

These things are generally a bad idea, but if you like the idea of the strategy they are pretty easy to replicate yourself for a far lower cost and a lot more flexibility.

If you fish around on the same site I linked, there is also a post on how to evaluate investment products offered by insurance companies.
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Old 02-23-2012, 03:06 PM   #28
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I agree with most posters. Be very cautious of any annuity other than an immediate SPIA IMO...the fees and terms can be very high/inflexible. All you have to do is look at how large the commissions are for planners to sell them, and you'll know it's a bad deal for you.

Kinda like buying a TV at Sears and then buying the insurance from them at the register. They wouldn't be selling you that insurance unless they made money on it, now would they?
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Old 02-23-2012, 05:40 PM   #29
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Kinda like buying a TV at Sears and then buying the insurance from them at the register. They wouldn't be selling you that insurance unless they made money on it, now would they?
All trade is based on the assumption that trades willing undertaken are not zero sum. So the fact that the vendor made money does not mean that you lost money. In general, the buyer and the seller have different utility functions for various goods and services. If they do not, they should seek others to trade with.

Does it upset you when you pay someone $60 to give you a massage that makes you feel very good and de-stresses your week?

In fact, all sophisticated economies offer insurance. An economist as clever as Robert Shiller thinks that for the most part Americans are way underinsured for vbarious risks.

Of course, insurance against a broken TV is both mispriced, and a ridiculously small loss to try to insure. Very different from many other insurances, likely even including some financial products beyond term life, disability, and SPIAs.

Ha
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Old 02-23-2012, 06:46 PM   #30
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...In fact, all sophisticated economies offer insurance. An economist as clever as Robert Shiller thinks that for the most part Americans are way underinsured for vbarious risks....
Do people in other countries carry a lot more insurance than Americans (I've never really thought about what the typical Italian or Ecuadoran might insure that Americans don't)?
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Old 02-23-2012, 06:52 PM   #31
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Do people in other countries carry a lot more insurance than Americans (I've never really thought about what the typical Italian or Ecuadoran might insure that Americans don't)?
Ecuador is not an advanced economy. European states, and with their health scheme also Japan, insure many more risks, or the same risks mroe completely, but heretofore that has been done at a state level rather than individual.

I cannot really debate this, because I have mostly been an insurance scoffer, but I believe this to have been mostly an emotional decision rather than rational.

Ha
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Old 02-23-2012, 09:59 PM   #32
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Do people in other countries carry a lot more insurance than Americans (I've never really thought about what the typical Italian or Ecuadoran might insure that Americans don't)?
I know that when we dealt with DW's parents estates when they died a couple of years ago we were amazed at how many little insurance policies they had - on appliances, gadgets, etc, etc.

My mother died with lots of debt on catalog items and I expected to have to bail out my Dad, but everything was individually insured and the outstanding debts were cleared once we sent in a copy of the death certificate.
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Old 02-24-2012, 12:30 AM   #33
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Ecuador is not an advanced economy. European states, and with their health scheme also Japan, insure many more risks, or the same risks mroe completely, but heretofore that has been done at a state level rather than individual.

I cannot really debate this, because I have mostly been an insurance scoffer, but I believe this to have been mostly an emotional decision rather than rational.

Ha
I can't tell if Shiller is really directing his comments at Americans vs. the rest of the world, or just describing the audience he's talking to (and I imagine people in Ecuador with assets to insure are doing so).
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Old 02-24-2012, 12:57 AM   #34
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I can't tell if Shiller is really directing his comments at Americans vs. the rest of the world, or just describing the audience he's talking to (and I imagine people in Ecuador with assets to insure are doing so).
I don't know, either, but that was not important to me. I doubt Shiller has spent much time analyzing insurance coverages in other countries. As far as Ecuador, I would say that your guess is better than mine. I tried to limit my statement to what seemed to be provided and not go beyond that. The fact remains that Western Europeans have much more insurances than Americans. It called the Welfare Society, or Democratic Socialism, or whatever the reigning governments of the different countries shoose to call it. With the last four years of US administration, we may be moving in that direction anyway.

Ha
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Old 02-24-2012, 02:30 AM   #35
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I would not do it.
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So the idea is that moving into active management for this account would be done, despite the higher fees, for tax advantage purposes. I would go into a "growth" type category which has a typical allocation for this type of thing (80% stock, 20% bond/cash).

So...why not?
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Old 02-24-2012, 12:12 PM   #36
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Of course, insurance against a broken TV is both mispriced, and a ridiculously small loss to try to insure. Very different from many other insurances, likely even including some financial products beyond term life, disability, and SPIAs.

Ha
This is the key point.

And based on my friend's account, who works at a company and helped them price their insurance...let me guarantee you...they make a lot of money on those sales of insurance.
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